Berenberg's six favorite medium-sized companies with Spanish surprise
power on energy
€2,374German firm Berenberg has kicked off the year with an update to its list of favorite midcaps. Although he assumes that there are a series of uncertainties - tensions in the supply chain, rise in inflation and, of course, the Covid pandemic - that make forecasts and recommendations difficult, he ventures and makes a selection of 'top picks' that includes a Spanish surprise.
ENCE AND THE OTHER FIVE
- Ence is the Spanish company that appears on the list of medium-sized European companies preferred by Berenberg. "It is the main producer of eucalyptus pulp in Europe and the largest producer of biomass energy in Spain, with ESG credentials (environmental, social and corporate governance factors) that are leaders in the sector", point out these experts.
Berenberg refers to the legal problems of the paper mill in Pontevedra, with the annulment of the extension of the concession of its factory there, but he relativizes them and anticipates that the company will generate more than 55% of its market capitalization in free cash flow the end of 2023. "We believe that this generation of free cash flow is being overlooked by the market due to regulatory complications," he says.
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- Barco, a Belgian technology company known for its ClickShare meeting room technology and cinema projects. It is currently trading at half its pre-pandemic price even though the long-term outlook is more attractive at the moment, Berenberg says.
- Beneteau. This French company is the second largest boat manufacturer in the world. These analysts consider that it is on track to fulfill its promises announced on the last Capital Markets Day of 2020, "which should allow the value to rise again and close the valuation gap with its peers in the nautical sector."
- Esker, a leading French company in the development of document process automation software, is well placed to capture the structural growth in its markets from regulation and the shift towards digitization, these analysts anticipate. "It remains one of the best options due to its high quality and its ability to accelerate growth, while we also expect some mergers and acquisitions to take place in fiscal 2022," they add.
- Fastned, one of the few pan-European promoters and operators of fast charging stations for large and scalable electric vehicles, represents an "attractive" commitment to the electrification of transport, these analysts indicate.
- flatexDEGIRO, Europe's fastest growing online broker, is poised to continue to gain share in under-penetrated markets in continental Europe, Berenberg anticipates. "Strong growth should also help margin expansion, given the scalability of the business," she says.
"HIDDEN JEWELS"
Berenberg has scanned the market for smaller companies - with a market capitalization of less than €1bn - that he believes are misunderstood by the market because they are poorly hedged, with four or fewer firms tracking value.
"Our hidden gems are Ekopak, Hydrogen Refueling Solutions (HRS), SECO, NX Filtration, Italian Sea Group and Xilam. We believe they represent attractive opportunities for those able to invest in less liquid stocks with a long-term holding horizon," he concludes.
